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PIA plane 'held back' by Malaysian authorities over UK court case

TheSnakeEatingMarkhur

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ISLAMABAD/KUALA LUMPUR (Reuters) - A Pakistan International Airlines plane has been held back by Malaysian authorities due to a British court case over the jet’s lease, the airline said on Friday, adding it would pursue the matter through diplomatic channels.

The Boeing 777 aircraft was seized after a court order, an airline spokesman said, and alternative arrangements were being made for passengers due to fly from Kuala Lumpur back to Pakistan.

The case involved a $14 million lease dispute, a PIA official said.

“A PIA aircraft has been held back by a local court in Malaysia taking a one-sided decision pertaining to a legal dispute between PIA and another party pending in a UK court,” a PIA spokesman Abdullah H. Khan said in a statement.

“We were told that the plane has been impounded on a court order,” Khan said later in a video statement. “PIA’s legal team will pursue it in the Malaysian court, and we hope that we will resolve this issue as soon as possible.”

According to orders passed by the Kuala Lumpur High Court on Thursday seen by Reuters, the plaintiff of the case is Peregrine Aviation Charlie Limited and the matter pertains to two jets leased to PIA by Dublin-based AerCap, the world’s largest aircraft lessor, in 2015.


They are part of a portfolio that AerCap sold to Peregrine Aviation Co Ltd, an investment unit of NCB Capital, the brokerage arm of National Commercial Bank SJSC, in 2018.

According to the interim injunction, PIA is restrained from moving two aircraft in its fleet – a Boeing 777- 200ER with serial number 32716 and a Boeing 777- 200ER with serial number 32717 – once they have landed or parked at Kuala Lumpur International Airport until a further hearing on the matter later this month.

Tracking data from Flightradar24 showed only one of the two Boeing 777s covered by the court order is currently in Kuala Lumpur. The other was last recorded in Karachi last month.AerCap, which continued as part of the agreement to provide lease management services to Peregrine, declined to comment.

Malaysia Airports Holdings Berhad, the country’s airport operator, and its subsidiary were ordered to make sure the aircraft do not leave Kuala Lumpur International Airport.

Malaysia’s Ministry of Transport said in a statement on Friday that the aircraft was being held pending legal proceedings set for Jan. 24.

Malaysia Airports Holdings Bhd said the matter was not related to airport operations.


PIA in a statement described the situation as “unacceptable” adding that it had asked for support from Pakistan’s government to raise the matter diplomatically.

The office of Malaysia’s prime minister and the foreign ministry did not immediately respond to requests for comment.

Pakistan’s High Commission in Malaysia was “in close contact with the relevant Malaysian authorities and Pakistan International Airlines to address the issue,” ministry spokesman Zahid Hafeez said, adding that the passengers would be flown home on Friday.

With more than $4 billion in accumulated losses, PIA was already struggling financially when flights were grounded last year due to the pandemic.

After it resumed operations in May, a domestic PIA flight crash in Karachi killed 97 of 99 people on board.

Pakistan’s aviation industry was then hit by a scandal in which pilots were found to hold “dubious” licences – prompting a number of countries to ban PIA from operating flights in their jurisdictions.

The airline was banned from flying to the European Union for six months over safety compliance concerns under a ban still in place.

Reporting by Charlotte Greenfield and Asif Shahzad in Islamabad, Syed Raza Hassan in Karachi, Joseph Sipalan and Liz Lee from Kuala Lumpur, and Tim Hepher in Paris; Writing by Gibran Peshimam; Editing by Jason Neely, Susan Fenton and Louise Heavens
Our Standards: The Thomson Reuters Trust Principles.

Days old news
 

bahadur

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Completely irrelevant here.
world singles you out from normal que at the international airports for additional questioning when they come to know who you are ?
that is real world .
 

SMC

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world singles you out from normal que at the international airports for additional questioning when they come to know who you are ?
that is real world .
Also irrelevant.

This actually doesn't happen to Pakistanis anymore than people from most poor countries, it's a fantasy bhartis have created in their mind since I know so many people who travel on Pakistani passports. You actually have no idea how immigration and customs work at airports going by your statement. Like all things negative to Pakistan, bhartis exaggerate them to astounding heights. Yeah, you're living in some other world, like most bhartis who have fantasies like these. Also mind telling me why so many bhartis are so desperate to get US, Canadian, UK etc passports? They give up their own coveted bharti passports to get those citizenships. 🤣 Bhartis are literally falling over each to get out of bharat in the last 10 odd years.

Also, will you continue to derail the topic.
 
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VkdIndian

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Whatever facade may be put up here but the true feelings of Pakistanis portrayed by one of its own.


It is in fashion now a days to name everyone an agent of hostile countries if they ask hard hitting questions or bring out realities the way this journalist is doing here. Indian media too is guilty of that.

This journalist appears to be unbiased and ruthless.
 

fallstuff

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Malaysia must be a signatory to a aircraft repo agreement. There have to be a some kind of agreement between nations as airplanes fly all over the world.
 

SMC

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Whatever facade may be put up here but the true feelings of Pakistanis portrayed by one of its own.


It is in fashion now a days to name everyone an agent of hostile countries if they ask hard hitting questions or bring out realities the way this journalist is doing here. Indian media too is guilty of that.

This journalist appears to be unbiased and ruthless.
Ruthless yes, unbiased no. He's making a mountain out of a mole hill. Why would IK directly care about small issues like one plane getting impounded? Honestly that seems like such a minor issue that the PM or the president should have little or not involvement with that. This entire story should be a very minor story but has been made into a huge deal by people not acting in good faith - for the most part that is media and bhartis.
 

VkdIndian

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for the most part that is media and bhartis.
Yes. Actually you have a point here.
A prime minister can’t keep track of minute to minute account of all government departments. Air India this side is not as bad as PIA (currently) but not doing any stellar job either compared to private entities. It is deep in red and surviving on financial packages from the government.

Media earns its bread and butter trough sensationalisation of everything. That happens all across the world. Indian media is no better. The anchor in question appears to be a little unhappy with IK as a whole. Hence a little bit of extra bite in his comments. Though, I agree with him on certain aspects about economic state of a country verses international standing. In this area Pakistan has been quite weak.

Indians do latch on to anything that can give them an opportunity to portray Pakistan in bad light. But this has been mutual. Look at the comments and language used by a large number of FMs towards each other. I have become a member of this forum just now but have been observing this forum for a couple of years. On an average use of foul and cuss words is a little more by Pakistani friends.

I posted that video since it is linked to this thread.Didn’t add anything from my side.
 
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Tomcats

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PIA’S PLANE TRUTHS

Article: https://www.dawn.com/news/1605914

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The PIA aircraft, that was impounded in Kuala Lumpur, returns to Islamabad on January 29 | Hassaan Ali Khan


It seemed like a routine flight for Captain Athar Haroon and his crew as PK894 descended into Kuala Lumpur. He was flying one of the 12 Boeing 777s Pakistan International Airlines (PIA) has in its fleet. But this was not just any other aircraft. This particular plane was one of the two Boeing 777s that PIA has leased from a Dublin-based aircraft lessor. And PIA was also fighting a British court case over the jet’s lease.

While the plane was taxiing to the designated gate at Kuala Lumpur International Airport (KLIA), the captain and his crew were unaware of the flurry of activity happening behind the scenes at the airport. Inside the air traffic control tower, the controllers were instructed not to clear the flight back to Islamabad, which was supposed to fly within a few hours. The aircraft had landed in Kuala Lumpur on schedule, but it was not leaving on one.

Unaware of all this, PIA station manager Salman Wahab and his team loaded the plane for the return flight and boarded passengers as usual. But this was not going to be just another day at the job. Shortly before the plane was set to take off, bailiffs arrived with airport staff, and told Wahab to leave the aircraft and offload everything.

After a PIA plane was impounded in Kuala Lumpur over a lease dispute involving the aircraft, making headlines both nationally and internationally, a lot of finger-pointing followed. But how did we end up in this mess? And is there a way out?

Something was clearly not right. Soon, it would be clear to all that this plane was not going anywhere. But while the plane could not travel back to Pakistan, bad news travels fast. In an audio note sent to several pilots and aviation WhatsApp groups, a PIA crew member said, “Check out the level of PIA’s embarrassment… [The Malaysians] have impounded the plane and told us that it cannot go back. This is the situation…”


Within hours, the voice note was circulating on WhatsApp groups across Pakistan, with journalists and PIA officials still attempting to understand what actually had happened. The passengers, who were asked to disembark the aircraft shortly after boarding, were also confused. According to media reports, the passengers were initially kept in the dark and told that the plane had developed a ‘technical problem’. There was a technical problem, indeed. But it was not a mechanical issue in the aircraft. It was a problem pertaining to its lease.

Little did the passengers know that they would be unable to board the plane at all that day and would, eventually, be flown home via Dubai and Doha only two days later.

The stranded crew would finally fly back on January 18, three days after the plane was seized on January 15. They would return to a country dealing with the aftermath of the embarrassing incident, with many pointing fingers at the governments (either the previous or current government, depending on their party allegiances), the ministers and the national carrier’s management, which mostly comprises men in uniform and retired air force officers.

As we know by now, the impounded Boeing 777 — which is now back in Pakistan — was seized on the orders of a local court in Kuala Lumpur over a 14-million-dollar lease dispute. The Kuala Lumpur High Court ordered the release only after both sides — Peregrine Aviation Charlie Limited and Pakistan International Airlines Corp — reached an ‘amicable’ settlement of the dispute, involving the two planes leased to PIA.

The Kuala Lumpur fiasco has only shed light on an issue that has persisted at PIA for years. In December last year, the airline had decided to remove four ATR aircrafts from its fleet. Unsurprisingly, the reason here was also an ‘expensive lease’ arrangement.

But how did we end up in this mess in the first place? And what exactly happened?

BAD DEALS

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The stranded passengers line up at a restaurant at Kuala Lumpur International Airport (KLIA) | PIA


Deciding to settle the matter out of court in the UK, PIA paid seven million dollars to Peregrine Aviation Charlie Limited. This settlement enabled PIA to bring back the plane, but many insiders say they hardly see this return as any kind of victory. The current management of the national carrier feels ‘stuck’ with the Boeing 777s. They reportedly did not want to keep these aircrafts, even before the Kuala Lumpur incident and the international bad press that came with it.

Those in the know allege that the current PIA management had been wanting to get rid of the Boeing 777s, along with four other ATR72-500s that had been leased from AerCap — the world’s largest aircraft leasing company, based in Dublin, Ireland. The two Boeing 777s, that were leased to PIA in 2015 by AerCap, are part of a fleet portfolio it sold to Peregrine Aviation in 2018 (the company that eventually took PIA to court).

Reportedly, the PIA management is currently embroiled in a behind-the-scenes battle with the lessor to sort out the mess it has landed in. Some, including Aviation Minister Ghulam Sarwar Khan, argue that the airline finds itself in this position mostly due to overly expensive and unfeasible lease agreements on some of its dry-leased (leases without crew) aircrafts.

The two Boeing 777s are leased at 580,000 dollars per month, per plane. Both the planes cost PIA a hefty 1.1 million dollars a month on lease payments alone. So, if we take the 9-million-dollar claim by Peregrine Aviation in the UK, that is around 9 months of lease payments.

Airlines make payments through a very complex system, which is dictated by lease agreements that can vary from plane to plane and deal to deal. The payments are sometimes made every three months while, in other cases, they are made after even longer intervals, depending on the cash flow situation of the airline. Leasing companies are mostly very accommodating about these matters.

But these are unprecedented times.

The PIA management is stuck in a quagmire with their flights to Europe being banned. The other main lifelines of the airline, Haj and Umra, were also cancelled due to the coronavirus last year, impacting the airline’s income significantly, and only adding to the losses caused by limited air travel during the pandemic. All this has left PIA with half of its fleet sitting idle.

The airline has nine of its own Boeing 777s and has three 777s on lease, including the one that was impounded in Kuala Lumpur. (Two are leased from AerCap and one from another lessor Macquarie AirFinance). PIA has to pay for the dry-leased planes even if they are not in use, unless a deal is struck ensuring some relaxation during such idle times. A senior PIA official says that the lease agreement with AerCap doesn’t provide that kind of flexibility, so PIA is stuck.

The situation is not unique to PIA. According to Fitch Ratings, an American credit rating agency, aircraft leasing companies report that nearly 90 percent of airlines have been unable to make lease payments and have had to request rent deferrals. Lessors are also dealing with increased lease defaults and lower lease renewals since July 2020.

Seeing all this, the severity of the actions in Kuala Lumpur was unexpected to say the least.

The current management of the national carrier feels ‘stuck’ with the Boeing 777s. They reportedly did not want to keep these aircrafts, even before the Kuala Lumpur incident and the international bad press that came with it.

PIA recently issued a tender for almost eight narrow body aircrafts. PIA will be replacing almost 15 aircraft since their dry-lease agreements are coming to an end. The two Boeing 777s leases will expire this year. One wonders why the leasing company is getting into such a messy situation in the middle of all this. Only a few months ago, an Irish diplomat in Islamabad reportedly approached the Pakistani finance ministers as well as foreign office officials to urge them to keep AerCap aircraft in the PIA fleet.

A LONG TIME COMING

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A PIA official checks in with a passenger stranded at KLIA | PIA


So how exactly did we get stuck with these ‘expensive’ deals? To answer this question we have to understand how Civil Aviation and PIA functioned back in 2015, when the deals were first made.

In 2015, PIA and Civil Aviation worked under the leadership of retired Captain Shujaat Azeem, who had been appointed as aviation adviser to Prime Minister Nawaz Sharif in 2013. It is believed that Azeem was the blue-eyed boy of Sharif. Reportedly, when the Ministry of Defence, which had PIA and Civil Aviation under it, objected to Azeem’s appointment, a separate Aviation Division was created under the Cabinet Secretariat to facilitate the retired captain and his ambitious plans. An entire floor of the PIA office building in Islamabad’s Blue Area was given to the Aviation Division, and its adviser directly reported to the then prime minister.

PM Sharif took a keen interest in aviation and, if Azeem’s opponents in the aviation industry are to be believed, the then aviation adviser utilised this fact to bring dramatic changes to the national carrier. He went on a fleet replacement spree unlike any other the airline had seen before. It is important to note that the PIA board of directors approved a fleet renewal plan in 2012. According to the plan, PIA decided to phase out the aged planes in its fleet. But Azeem went on to initiate the process, which meant retiring all old PIA planes, including its iconic Boeing 747s and its workhorses Airbus A310s.

At the time, PIA had eight of its own Boeing 777s and seven ATR42-500s that it had received directly from the manufacturers. To fill the void left by the retired aircrafts, Shujaat Azeem initially wanted to dry-lease Airbus A330s. But this proved to be a controversial decision with the PIA establishment, which was predominantly pro-Boeing.

The situation is not unique to PIA. According to Fitch Ratings, an American credit rating agency, aircraft leasing companies report that nearly 90 percent of airlines have been unable to make lease payments and have had to request rent deferrals. Lessors are also dealing with increased lease defaults and lower lease renewals since July 2020.
At one point, PIA had 15 Boeing 747s and nine Boeing 737s. The idea of getting Airbus A330s was not acceptable to the powerful pilots’ association and other stakeholders in the airline, who considered this ‘too much of a shift’ in PIA. One senior official recalls that there were fights and bitter arguments in PIA among senior management.

Boeing 777s were suggested instead, apparently against the wishes of Azeem at that time, who had initially (and rightly) recommended that PIA needed medium-sized planes. He later ended up rejecting the A330s, which have a lower seating capacity than the 777s, himself. This is how PIA has functioned for decades. Decisions do not appear to be made after considering economic sense or commercial suitability, but are rather based on political manoeuvring and strategising.

HOW PIA ENDED UP WITH THE LEASED 777S

In January 2015, a tender notice was issued to acquire up to four narrow-body aircrafts (Airbus A320s or Boeing 737s) and three wide-body aircrafts (Boeing 777s, Airbus A330s, A340s etc). But, in March 2015, a new search tender was issued, clearly tailored to Boeing 777s. Eventually, AerCap was awarded the contract and the planes, one of which was recently seized in Kuala Lumpur, made their way to Pakistan.

Later, the Auditor General of Pakistan noted that some specifications were added “keeping in view the offer of AerCap in the earlier tender (31st January, 2015) bidding.” Commenting on the process, the auditors had explicitly stated that there was a “lack of impartiality in the whole tendering process.”

Another offer that was made by Dubai Aerospace Enterprise Ltd (DAE) — an aerospace corporation and one of the largest aircraft leasing companies in the world — was for A330-200s at the rate of 540,000 dollars a month. The 777-200ERs, on the other hand, were initially offered at 670,000 dollars, and were eventually brought down to 580,000 dollars. One cannot help but think that if PIA had decided to opt for the Airbus A330s instead, it could have been in a very different situation today.

The auditors had observed the same all those years ago stating that, “...PIAC could have availed the best option of leasing the aircrafts at best competitive/economical rates but the same was not done and the management failed to make prudent decisions, rather the amendments were made to favour the contractor of their choice which caused loss to the corporation. The responsibility for the subject losses lie on [the] PIA Board of Directors, Managing Director or CEO of PIAC of respective period.”

A PIA Boeing 777, leased from AerCap and now owned by Peregrine Aviation Charlie Limited, lands in Toronto | Abdul Haseeb Khan

AN OLD PATTERN

The Kuala Lumpur fiasco has only shed light on an issue that has persisted at PIA for years. In December last year, the airline had decided to remove four ATR aircrafts from its fleet. Unsurprisingly, the reason here was also an ‘expensive lease’ arrangement.

A PIA spokesperson had then issued a statement, saying that the management, on the instructions of PIA CEO retired Air Marshal Arshad Malik, had reviewed the lease agreement thoroughly and got benefit of a clause in the document during the suspension of flights due to the Covid-19 pandemic.

“The ATR-72 planes on lease to PIA were costing rentals whilst on ground,” the spokesperson had said. “PIA officials negotiated a deal to return the aircraft to the leasing company with no cash penalty.”

“It’s beyond the norms of leasing business,” the spokesperson had said, patting the airline officials on the back. But this negotiation savvy clearly did not pan out when it came to the Boeing 777s leased from AerCap.

In a presser, held before the return of the impounded Boeing 777, Federal Minister for Aviation Ghulam Sarwar Khan also blamed the previous government for acquiring the planes on an ‘expensive’ lease that the national carrier failed to pay on time due to the pandemic.

He maintained that the financial problems the airline was facing were due to “poor policies” of the previous Pakistan Muslim League-Nawaz (PML-N) government. He claimed that they made “unnecessary political appointments even on fake degrees that ruined the organisation.”

He recently repeated the same at a press conference, and then, reportedly, upped the ante. According to a Dawn report, answering questions of reporters in Taxila, the minister claimed that an Indian lobby conspiracy was behind the seizure of the PIA passenger plane in Malaysia last month. The Aviation Division issued an official rebuttal the following day, calling the statement “totally baseless”.

Nonetheless, the aviation minister, and many others, back the argument about the expensive lease agreements.

The current PIA management and the government need to find a way out of this situation. Repeatedly placing blame on those no longer in office achieves precious little. The airline has accumulated nearly four billion dollars in losses. The ‘fake licences’ issue, which was arguably mishandled and blown out of proportion by the aviation minister, continues to haunt the national carrier. And every time there is a news flash about PIA, one fears that it will be bad news — unfortunately, more often than not, it is.

People who follow the aviation industry have maintained that these planes were acquired on expensive leases, at rates that Pakistan could not afford even before the devastating economic impact of the global pandemic. But the culture that led to these deals being made still persists at the airline.

The impounding of the Boeing 777 should not just be used for political mudslinging. It should serve as a wake-up call for all the stakeholders.
 

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